Aug 10, 2022
(Bloomberg)
Oil fell in another choppy session as flows through a major pipeline from Russia to Europe looked set to resume soon, while industry estimates showed an increase in US inventories.
West Texas Intermediate reversed earlier gains to trade below $90. Hungarian refiner Mol Nyrt said it has transferred a fee to Ukraine that should allow the restart of Russian oil flows along the southern leg of the Druzhba pipeline. Russia’s pipeline operator Transneft PJSC said oil may reach Slovakia by the end of Wednesday.
Though likely short-lived, the disruption to the Druzhba pipeline is crimping crude flows at a time when Europe is grappling with a wider energy crisis. Later this week, the Rhine River is set to become virtually impassable at a key waypoint in Germany, choking off shipments of energy products.
“The crucial topic of the morning has been when deliveries on the southern leg of the Druzhba pipeline would resume,” analysts at brokerage PVM Oil Associates Ltd. said in a report. “The short-term support is about to disappear.”
Estimates from the industry-funded American Petroleum Institute showed a 2.16 million barrel increase in US crude stockpiles last week, including a build at the key storage hub at Cushing, Oklahoma, according to people familiar with the data. Official figures will follow later on Wednesday.
Crude hit a six-month low last week on signs that demand was weakening, especially for US gasoline, just as investors fretted that a global slowdown is looming. Still, plenty of bullish risks for crude remain as Russia’s invasion of Ukraine drags on and sanctions against Moscow pile up. Separately, producer group OPEC+ has warned its spare capacity has sunk to extremely low levels.
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Traders are also set for a barrage of data in the coming days. US inflation figures later Wednesday will be the latest indicator about the path forward for interest rates. Both the Organization of Petroleum Exporting Countries and the International Energy Agency are set to issue their monthly snapshots on Thursday.
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